Business fears stoked by carbon-deal limbo

Government, Greens and independent members of Parliament failed to agree on Friday about how to put a price on carbon, and discussions are set to drag on for some months.

But industry is becoming increasingly concerned about the secrecy surrounding the negotiations and the uncertainty this is creating.

The government is understood to have discussed its proposed mechanism with members of the multi-party committee on climate change on Friday.

But the failure to reach an agreement has underscored that negotiations are likely to be protracted and there will be no outcome clear for some months, given the number of contentious issues, such as compensation for industry and households.

“Discussions are continuing on the broad architecture and therefore no agreed position can be released at this stage," said a communique after the meeting.

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Prime Minister
Julia Gillard
has said she wants to finalise a carbon pricing mechanism this year to cut emissions, and has established the multi-party committee on climate change to negotiate agreement between political parties about the best pricing model.

But she faces a difficult task balancing community concern about rising electricity prices, the need within the energy sector for investment certainty, environmental concerns about climate change and the position of emissions-intensive trade-exposed industries.

Before the meeting on Friday, Labor is understood to have proposed an initial fixed price of carbon with an eventual transition to a market-based scheme.

Climate Change Minister Greg Combet has held extensive discussions with Greens deputy leader Christine Milne and NSW independent MP Rob Oakeshott about the key issue of which carbon price mechanism to adopt, but in recent days, key differences have emerged between the Greens and Mr Oakeshott.

Mr Oakeshott has indicated he prefers moving immediately to a market-based trading scheme, while the Greens and government are favouring a hybrid scheme of an initial fixed starting price.

The other member of the committee, Tony Windsor – who with Treasurer Wayne Swan did not attend the meeting on Friday – has indicated he wants to wait until consultant Ross Garnaut has updated his 2008 report and the Productivity Commission has delivered a report about emissions reduction schemes in other countries before he is prepared to reach an agreement.

The communique on Friday stated committee members noted “agreement to the final design of a carbon price could only be achieved when all elements of the policy could be considered together, with final agreement taking place in the coming months".

Final decisions were yet to be made about the design of a mechanism and assistance packages for households and industry. In particular, the government is under pressure to drop its promise to exclude petrol from a carbon scheme.

The release of the communique heightened concerns about the lack of transparency of the issues being discussed. The government has classified as “cabinet-in-confidence" committee negotiations and papers presented to it, preventing any of the members from discussing matters under consideration with non-committee members.

As a result, members of the government climate change business roundtable have voiced concerns to Mr Combet and Mr Swan that they would have little input into the design of a carbon price before the government reached an agreement with the Greens.

On Friday, Business Council of Australia deputy chief executive
Maria Tarrant
said business was concerned that the only information available about the government’s plans and time frame was via “speculation in the media".

“It is disappointing that there is not clarity on the range of mechanism options being considered through the [committee] process," said Ms Tarrant.

“Business is increasingly concerned that discussions need to occur to get the details of what is being considered so they can understand the implications not only for their business but also for the economy.

“The continued uncertainty . . . does not help businesses as they plan for future investment."